Frugal Living

Can Unpaid Debt Reduce Social Security Payments?

For many Americans with unpaid debts, there is a concern that their social security payments will be affected by the debt. While this isn’t normally the case, there are certain instances where social security payments can actually be reduced, depending on the type of debt you owe. Here’s how unpaid debt could potentially reduce your social security payments.

Debtors Normally Can’t Touch Social Security

Under normal circumstances, debtors can’t affect your social security benefits, as these are government-issued benefits. Government and private debts (usually) fall under two different sectors, so if you only owe a few thousand in credit card debt, your social security shouldn’t be at risk.

While your social security payments can’t be directly touched, once they hit your bank account, they’re fair game. Debtors can often gain access to your bank account in a garnishment of wages or other legal action to recover the cost of your debt. This can leave all of your sources of income vulnerable to garnishment, so be careful not to have any outstanding debts when you retire. The point of retirement is to be debt-free and financially independent, after all!

Certain Circumstances

There are certain circumstances, however, when you owe the government money; and in these cases, there’s a real possibility that your SS will be affected in retirement.

Federal Debts & Taxes

The first debt that could affect your social security benefits is unpaid tax debt. If you owe back taxes to the federal government, your social security payments could be reduced to meet your debt. According to, you could have up to 15% of your benefits garnished on a monthly basis until your tax debt is paid back. If 15% doesn’t seem like a lot, consider that the average social security payment is around $1,500-2,200, 15% would account for $225 of the lower amount.

It’s a good idea to always stay on top of your tax debts to avoid any other penalties and fees that come with tax delinquency. If you feel you need help creating a more comprehensive financial plan, a financial advisor or planner may be able to help. You can compare the 5 best financial advisors in Illinois on the Careful Cents site for a better idea of what services they have to offer.

Family Debts

Child Support and Alimony aren’t usually things that someone at retirement age has to worry about, but it’s certainly not unheard of. If you’ve fallen behind on either of these family obligations, you may have your benefits garnished to meet those financial burdens. The Federal Government can garnish up to 60% of your benefits should you find yourself with a judgment against you. This amount could increase even more depending on just how far you’re behind on your payments. The best thing to do here is to pay your family obligations. Times get hard, and sometimes you can’t make payments in full, but you should always try to make up for what you missed as soon as possible. Missing a single payment can lead to the slippery slope of payment delinquency.

Student Loans

CNBC reports that student loan debt for people over 60 quadrupled from 2005 to 2015, meaning there are going to be a lot more retirees entering their golden years with this kind of debt on their plates. Defaulted student loans can have serious financial implications, not the least of which is having your social security benefits garnished to repay them.

The money you’ve worked your entire life to be entitled to can be taken away in a flash if you don’t repay your student loans. The fact is, you should always repay your debts, and especially

your student loan debt. Education can be quite expensive, and when you don’t pay back your debts, someone somewhere has to cover that cost; usually the taxpayers.

Never Depend Solely On Social Security

Social security is your right as a taxpayer and laborer, but it shouldn’t be depended on entirely as your retirement plan. You should begin saving for retirement as early as possible, so you’ll have plenty of income to work with during your golden years.

Invest your money in a 401k, Roth IRA, or another retirement vehicle to ensure you won’t have to depend on SS to get you through retirement. With a meager budget based solely on a SS check, you won’t be able to experience all the freedom and joy that retirement has to offer. The idea behind saving for retirement is to finally give yourself financial freedom; the last thing you want to do is spend all of your time worrying about whether your SS check will cover groceries for the week or not.

Millions of Americans fail to save enough for retirement every year and end up taking on part-time or even full-time jobs to make ends meet. Don’t let yourself be one of the millions who are forced to come out of retirement and rejoin the workforce, and remember to keep your debts paid so they don’t come back to haunt you later in life.


Retirement should be a fun and adventurous time in life; one in which you can rest and do all of the things you never had time to do when you were working. Don’t burden yourself with money by defaulting on loans or other debts; keep your debts paid and your savings high to maximize your retirement experience.

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